It is always good to have a fair picture of what you intend to do in the New Year. Similarly, as you are at the beginning of this new Financial Year 2018-19, it is ideal to do your tax planning. In this way, you will be in a position to declare your investments, when your employer asks for the investment declaration.
The government has entrusted the responsibility of deducting tax on your salary with your employer. You will be asked to declare your investments at the beginning of the year. You will have to declare your investment commitments for the year, on your company’s HR portal. Based on this, after accounting for likely tax deductions and exemptions, your employer will deduct tax and pay it on your behalf in the form of TDS. The Form associated with Investment Declaration is Form 12 BB which has to be submitted at the end of a Financial Year.
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If you carefully plan your investments, you can make optimum use of all tax-saving opportunities available to you. However, when you plan your investments, keep the following important points in mind:
1) Study your existing financial commitments:
Studying your existing financial commitments, helps you plan your investments. Planning your investments reduces half the burden of tax planning. You certainly will have expenses such as interest on home loan, education loan repayment, tuition fees, rent, etc which are eligible for tax deduction. Also, if you invest in tax-saving instruments like PPF, consider these as well.
2) Analyze tax-saving investments:
Analyzing your existing financial commitments gives a clear picture of how much you can invest to save tax. When you invest more, do it after taking into consideration the risk, returns and liquidity of your investment avenues.
3) Manage documents:
Your employer will need proof of every investment and tax-saving expense that you declare, for the year. So, save, maintain and manage your investment declaration documents well. You will have to submit documents like bills, receipts etc. at the end of the Financial Year.
4) Monitor your progress:
Setting targets help in achieving goals. Monitor your progress along with your financial plan. If need be, make more investments to achieve your target.
5) Use your PPF Savings effectively:
PPF is an avenue which gives tax benefits as well as good returns. PPF has a 15-year lock-in. However, if it is at least seven years old, you may partially withdrawal PPF.
SEE ALSO: 5 Steps to Save Tax
6) Claiming HRA:
Usually, rent receipts and rental agreement copies are all you need to claim tax exemptions for HRA. Nevertheless, you will have to furnish a copy of your landlord’s PAN card, if you want to claim a benefit for rent paid in excess of Rs 1 Lakh.
7) Claiming LTA:
Change in LTA rules in 2018, allow you to claim any journey unclaimed in the previous year. This is to say that an unclaimed domestic travel expense of the previous block can be claimed in the first year of this block.
8) Claiming medical expenses of senior members:
If you incur medical expenses of senior members (over 60 years of age) in your family who have no insurance, you can claim a tax deduction for the same.
9) Change of job:
Make sure to submit Form 12BB to your new employer in case you switch jobs in the middle of a Financial Year. Keep him informed about your previous income and TDS, so that he calculates your tax liability correctly to make payments.
10) Pay off high-cost loans:
Get rid of any high-cost loans. Making an investment that earns less interest rather than paying off your high-cost loans, doesn’t make sense.
So, declare your investments on time and save tax. Finally, if you have missed the deadlines of declaring your investments on time and your employer deducts excess TDS, file Income Tax Returns and claim it.
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